Laguna Hills Mall sold; makeover planned

One of the entrances to the Laguna Hills Mall - it's located at the center of the mall and has a Coffee Bean to its right. Merlone Geier Partners bought the mall this week from Simon Property Group. ISAAC ARJONILLA, ORANGE COUNTY REGISTER

About Merlone Geier Partners

Business: Private real estate investment company focusing on mixed-use centers and community and neighborhood shopping centers on the West Coast. Founders are Peter J. Merlone and Bradley A. Geier.

Headquarters: San Diego and San Francisco

Local portfolio: In Southern California, 17 retail properties with 1.7 million square feet. Orange County properties include Fullerton Crossings in Fullerton; a part of Country Club Village in Yorba Linda; and a Walmart-anchored neighborhood shopping center in La Palma.

New acquisition: Laguna Hills Mall adds more than 60 stores with nearly 847,000 square feet of retail and dining space.

Source: Merlone Geier Partners

Graphics

Real estate investment company Merlone Geier Partners bought the struggling Laguna Hills Mall this week from Simon Property Group and announced preliminary plans for a major overhaul.

The new owners said they intend to give the shopping center an exterior and interior makeover and add a luxury theater, high-end grocery market, more signature restaurants and national retailers.

The changes will take place over several phases, said Jeremy Meredith, the new Laguna Hills Mall property manager for Merlone Geier, which is based in San Diego and San Francisco. "We're pretty early in the process and into the discovery phase."

The 40-year-old mall at El Toro Road and Avenida de la Carlota has floundered in recent years: The second-level food court, Laguna Cafes, closed in early 2011. At least 12 storefronts sit empty, most between JC Penney and Sears. Tenants, shoppers and analysts say the center looks dated and tired inside and out.

"It's almost dead," said Atul Desai, owner of Laguna Hills Mall Cinemas. "For the last two years, we've been hearing rumors about plans to remodel the mall, but nothing has happened."

Simon Property Group, which has owned Laguna Hills Mall since 1999, would not comment on the deal. Simon also owns The Shops at Mission Viejo, Westminster Mall, Brea Mall and The Outlets at Orange.

Meredith declined to say how much Merlone Geier paid for the 68-acre center, which includes anchor stores JC Penney, Macy's and Sears, along with surrounding pads that house Nordstrom Rack, Total Woman Spa, King's Fish House and three tire stores.

Representatives from Merlone Geier plan to meet with local leaders and city staff before unveiling makeover and rebranding plans for the 846,885-square-foot center.

"There are a lot of opportunities there," Meredith said. "Like all retail projects, the needs of consumers evolve over time. We're seeking out exactly what would best suit the greater Laguna Hills customer base."

Nearby competition

Merlone Geier has a big task ahead.

"Compared to other regional centers in Orange County Laguna Hills Mall is close to the lowest total sales, and is near the bottom in terms of average sales per square foot, a key measure of productivity," said Greg Stoffel, principal at Stoffel & Associates, a retail consulting firm based in Irvine.

"Considering that the center's actual trade area must be quite small and considering the proximity of Irvine Spectrum Center and Shops at Mission Viejo, it probably serves its local market fairly well. The problem is that it doesn't currently have enough attractive and desirable stores to draw from a wider area."

Taxable sales rose 0.7 percent to $118.4 million in 2011, after falling 0.2 percent in 2010, according the latest city records available.

In terms of destination appeal, Laguna Hills Mall lags other regional shopping centers, Stoffel said. "It ranks last due to its merchant mix – only 80 or so stores and not many sought-after stores at that. Having Sears and JC Penney as two of three primary department stores doesn't help either. It's similar to the Village at Orange in that respect, except Laguna Hills doesn't have Walmart, but has Macy's."

Desai, who has a lease for the mall's cinemas through 2025, said his business could do better if the mall attracted more shoppers. He said he'd like to continue operating the theaters, especially if the shopping center is renovated.

Related Links

One of the entrances to the Laguna Hills Mall - it's located at the center of the mall and has a Coffee Bean to its right. Merlone Geier Partners bought the mall this week from Simon Property Group. ISAAC ARJONILLA, ORANGE COUNTY REGISTER
Macy's is one of the three major anchor stores in the main building of Laguna Hills Mall. The shopping center recently was sold to Merlone Geier Partners. ISAAC ARJONILLA, ORANGE COUNTY REGISTER
The escalators leading to the Laguna Cafes has been closed off since early 2011. ISAAC ARJONILLA, ORANGE COUNTY REGISTER
The center of the Laguna Hills Mall, built in 1973. ISAAC ARJONILLA, ORANGE COUNTY REGISTER
The indepently-owned Laguna Hills Mall Cinemas is one of the long-time tenants at the Laguna Hills Mall. ISAAC ARJONILLA, ORANGE COUNTY REGISTER
JC Penney is one of the founding anchor department stores at Laguna Hills Mall. ISAAC ARJONILLA, ORANGE COUNTY REGISTER

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